Chancellor Rachel Reeves will revive plans for London to host the first "private stock market" in her Mansion House speech on Thursday, as this is seen as a way of attracting more companies to the City.
She will outline proposals for a regulated stock exchange system called Pisces - standing for the Private Intermittent Securities and Capital Exchange System - allowing investors to trade shares in private companies, CityAM is reporting, citing Treasury sources.
This was a proposal that had been mooted under the previous government to revive UK equity markets, providing partial exits for some investors and a stepping stone for smaller firms not quite ready for a full public float.
Previous reports have also suggested Reeves could be considering implementing a ‘Canadian-style’ pension model that would encourage local government pension schemes to consolidate into larger bodies as a way of increasing investment in the UK.
It comes as the London Stock Exchange's junior market, AIM, has seen an exodus of firms at the smaller end, particularly in the tech and biotech sectors, where companies say they are frustrated by the funding drought and the declining popularity of growth stocks.
Meanwhile, the current training ground for life on the LSE, and for some alternative to AIM, for the smallest companies is Aquis Exchange PLC (AIM:AQX), which just last week agreed to be taken over by the SIX Swiss Exchange.
Douglas Grant, CEO of Manx Financial, said: "Any mechanism that enables entrepreneurs to unlock equity is a welcome innovation.
"However, it's unclear why this approach would necessarily lead to an increase in IPO activity."
With PISCES serving as an alternative to more heavily regulated stock exchanges, he said it raises the "reasonable concern that platforms like AIM might perceive it as a competitive threat, potentially affecting their market position".
What's more, Grant said tax strategies would need to be aligned to incentivise entrepreneur participation, as "without a supportive tax framework, uptake may be limited".
He did like the sound of potentially enhanced liquidity within capital markets from the deregulation of local pension schemes as he says it "has proven to be a highly effective tool in other jurisdictions, driving growth and providing more robust market dynamics".
Dan Hirschovits, a partner at law firm Paul Hastings, felt PISCES is "a positive step, designed to encourage a culture of greater public equity investment in UK companies, particularly as companies that might once have sought an IPO at an earlier stage in their growth trajectory have stayed private for longer with the amount of private capital".
But he said it will be important to ensure that there are appropriate guardrails and protections to ensure that investors get the right level of information on companies whose shares are traded on the market.